Rule of 72 Calculator
The Magical Water Lily
Imagine a magical water lily in a pond that doubles in size every day. The Rule of 72 is like a secret formula to understand this magic. If you know how fast it's growing (its interest rate), you can predict how long it will take to double. For example, if it grows at 8% per hour, the Rule of 72 tells you it will double in size in about 9 hours (72 ÷ 8 = 9).
Conversely, if you want the lily to double in 6 hours, the rule tells you it needs to grow at a rate of 12% per hour (72 ÷ 6 = 12). This simple rule gives you a powerful, quick way to understand the speed of compound growth for your investments.
Related Financial Planning Tools
- Compound Interest Calculator: For a precise calculation of how your investment grows over time, including the doubling point.
- Investment ROI Calculator: Calculate your actual Return on Investment, which you can then use in this calculator.
- Inflation Calculator: Use the Rule of 72 to estimate how long it will take for inflation to cut the purchasing power of your money in half.
Frequently Asked Questions
What is the Rule of 72?
The Rule of 72 is a quick, useful mental shortcut to estimate the number of years required to double the value of an investment at a fixed annual rate of interest. You simply divide 72 by the annual interest rate to find the approximate number of years.
How accurate is the Rule of 72?
The Rule of 72 is an approximation, not an exact calculation. It works best for interest rates between 6% and 10%. While it becomes less precise for very low or very high rates, it remains an excellent tool for quick estimations without needing a complex calculator.
Can I use this for things other than money?
Yes! The Rule of 72 is a rule about compound growth, so it can be applied to anything that grows at a steady rate. You can use it to estimate the doubling time of a country's GDP, the effect of inflation, or even population growth.